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Economy

Taxman defends imposition of 16 per cent VAT on fuel

A petrol station attendant fuels a car.
A petrol station attendant fuels a car. FILE PHOTO | NMG 

Kenya Revenue Authority has defended the 16 per cent VAT on fuel, arguing that Parliament passed the levy and it cannot be challenged on grounds of being oppressive.

The tax was originally included in a law passed in 2013, but was postponed amid protests about its impact. The revenue authority finally implemented the tax on September 1.

Activist Okiya Omtatah and Cotu had termed the tax oppressive, adding that Parliament had voted to suspend the levy for a further two years.

“That a provision imposing tax cannot be said to be unconstitutional for reasons that the same is deemed oppressive. Indeed in its very nature taxation is punitive,” said KRA, terming the petition opposing the tax as baseless, frivolous and abuse of the court process.

The tax was part of a government bid to finance health, housing and other programmes, while narrowing the fiscal deficit to qualify for an extension of a standby credit facility with the International Monetary Fund.

The new tax has driven up pump prices and triggered a suppliers’ strike that caused fuel shortages, which has eased in recent days.

In Nairobi, the price of petrol increased by Sh14.07 to Sh127.80 per litre, diesel increased by Sh12.34 to Sh115.08, while Kerosene used in most poor homesteads rose by Sh12.46 to Sh97.41.

KRA said it has tapped its power to impose the tax from the laws enacted by National Assembly, arguing that seeking to suspend the tax will see the court take over legislature and executive roles.

The High Court in Nairobi last week declined to suspend the tax, instead asking the petitioners to serve the Treasury, Energy Regulatory CommissionKenya Revenue Authority and the Attorney-General with their suit papers and return to court this week.

On Monday, the court set the hearing of the case filed in Nairobi for September 17.

However, Justice Stephen Riechi, sitting in Bungoma, issued temporary orders suspending the law giving hope of a temporary reprieve to motorists and Kenyans which was short lived because the Treasury rejected the orders.

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